For surgeons, apology laws made no difference in either the number of claims or the share of those claims that ended up in court. For non-surgeons, apology laws made things worse.
Laws enacted in 39 states over the past two decades with the aim of reducing malpractice litigation by shielding doctors who apologized for botched care aren't working as they were intended to, a new study has found.
In a study in Stanford Law Review, researchers at the University of Alabama and Vanderbilt University examined data from a major malpractice insurer—which the researchers declined to identify—for 90% of providers in a single specialty composed of surgeons and non-surgeons, about 9,000 providers.
Overall, about 4% of these physicians experienced a malpractice claim over the course of eight years. About two-thirds of all claims went to court.
For surgeons, the researchers found, apology laws made no difference in either the number of claims or the share of those claims that ended up in court.
For non-surgeons, however, apology laws had a dramatically worse effect. While the overall number of claims was unchanged in states with apology laws, those claims were 46% more likely to result in a lawsuit.
Study co-author Benjamin J. McMichael, an assistant professor at the Alabama's Hugh F. Culverhouse Jr. School of Law, says that's probably because surgical errors are usually more obvious than non-surgical errors.
For example, a patient will know that a sponge left inside the body is a surgical mistake, but will probably not have the expertise to know whether their worsening illness is due to bad luck or an overlooked symptom, he said.
That is, unless the doctor apologizes for it. The study found that, in states with apology laws, the payouts to patients of non-surgeons more than doubled compared to states without apology laws.
"The idea of the laws is to make patients less angry so they're going to settle for less," McMichael says. "But what I think is happening is you have this apology law, doctors apologize more often, and it sends the signal of malpractice to patients."
"Their beliefs are confirmed. 'I know something's gone wrong, I'm going to go out and seek all the evidence I can,'" McMichael says. "They get more evidence. They get better evidence, because their beliefs are confirmed on the front end. And with this additional evidence, they don't settle for less. They stay in the case longer. They get bigger verdicts, and they get better, bigger settlements."
Making Apologies Work
Despite the data suggesting otherwise, McMichael says there are clear psychological benefits to apologizing for both physician and patient.
McMichael and coauthor Larry Van Horn, associate professor of management and executive director of health affairs at Vanderbilt's Owen Graduate School of Management, say health systems need to train providers on when and how to apologize.
"When you apologize, there's a way to do it, and there's a way not to do it, and if you put it the wrong way, you can end up making people even angrier," McMichael says. "Say you come in a week later, or you send a lackey to deliver the news, or you do it through a phone call or a text message."
It's also a good idea to have an explanation for why a procedure or diagnosis went wrong, and to have some sort of settlement or offer to fix the problem in mind when telling patients about medical errors, he says.
What is to be done in the 39 states that have these ineffective apology laws?
"That's one place where we kind of take a step back," McMichael says. "The purpose of the paper is really to evaluate apology laws as they've been pitched by state legislature. Assuming state legislatures want to reduce malpractice litigation, apology laws aren't the way to go."
CMS Administrator Seema Verma details a five-point plan to improve quality of care and regulatory enforcement at the nation's nursing homes.
The Centers for Medicare & Medicaid Services has launched a review of regulations and processes governing safety and quality of care in the nation's nursing homes, Administrator Seema Verma said.
"While we support and promote the private sector's critical role in our healthcare system, CMS' duty to monitor the safety of the nation's hospitals, nursing homes, and other providers, is a unique governmental task which lies at the core of government's role in healthcare," Verma said in a media release.
"I have directed my team at CMS to undertake a comprehensive review of our regulations, guidelines, internal structure, and processes related to safety and quality in nursing homes," she said.
Verma said the review will focus on five areas:
Strengthen Oversight:
CMS will work with state survey agencies to oversee nursing homes. The SSAs visit and survey every Medicare and Medicaid participating nursing home in the nation at least annually to ensure they are meeting CMS' health and safety requirements as well as state licensure requirements. To be effective, SSAs must be fair and consistent in applying CMS rules, Verma said.
Enhance Enforcement
"We're strengthening our enforcement policies to hold nursing homes accountable for the care they provide. As part of this effort, we’re developing new ways to root out bad actors and repeat offenders," Verma said.
SSAs are conducting a portion of their unannounced after-hours and weekend inspections to focus on staffing problems during those times. SSAs will take appropriate enforcement actions against those facilities that fail to provide the required nurse staffing, Verma said.
"We're also improving quality of life for nursing home residents. Too often, residents with dementia-related psychosis have been deemed to be unruly or difficult, and have been given antipsychotic sedative drugs in contravention of FDA guidelines. CMS has worked through our National Partnership to Improve Dementia Care in Nursing Homes to curb the inappropriate use of these drugs in nursing homes," Verma said.
"We're also committed to working with Congress to strengthen nursing home enforcement. The FY 2020 Budget also requests $442 million for Survey and Certification, a $45 million increase from the previous year," she said.
Increase Transparency
We're constantly working to make sure the information on Nursing Home Compare is as accurate and informative as possible. In April 2018, we incorporated data on nursing home staffing based from a new payroll-based journal (PBJ) system into Nursing Home Compare and the Nursing Home Five-Star Quality Rating System. The new PBJ data allows CMS to more accurately track staffing levels in nursing homes.
CMS has also increased public awareness of nursing homes failing to meet our minimum health and safety standards. "Now, instead of publishing notices in local newspapers, we're publicizing instances in which CMS terminates our agreements with nursing homes due to poor quality on our website," Verma said. .
Improve Quality
CMS is developing quality measures that score providers based on patient outcomes, not adherence to processes, Verma said.
CMS fines nursing homes that don’t comply and the agency recently launched an initiative to invest these Civil Money Penalty dollars in efforts to reduce adverse events, improve staffing quality and improve quality of care for residents with dementia.
Put Patients Over Paperwork
When administrative burden increases with little or no benefit, patients suffer because mountains of unnecessary paperwork keep providers from patients. Additionally, high administrative costs can make it difficult for facilities to operate, Verma said.
"We are developing our regulatory strategy in a way that puts patient quality and safety first while removing unnecessary burdens on providers that create staffing challenges and increase cost without increasing quality," she said. "We want to make sure providers spend time caring for residents instead of completing unnecessary paperwork."
Federal prosecutors allege that the Sacramento-based health system and its affiliates submitted unsupported diagnosis codes for patient encounters with Medicare Advantage beneficiaries.
Sutter Health LLC and several affiliates will pay $30 million to settle allegations that they were overpaid after submitting inflated information about the dire health status of Medicare Advantage beneficiaries, the Department of Justice said.
Federal prosecutors allege that Sacramento-based Sutter and its affiliates submitted unsupported diagnosis codes for patient encounters with beneficiaries. These unsupported diagnosis scores inflated the risk scores of these beneficiaries, resulting in the Medicare Advantage Organization plans being overpaid.
Sutter submitted diagnoses to the MAOs for the MA Plan enrollees they treated. The MAOs submitted the diagnosis codes to CMS from the beneficiaries' medical encounters, such as office visits and hospital stays. The diagnosis codes were used in CMS' calculation of a risk score for each beneficiary, DOJ said.
Affiliates named in the settlement are Sutter East Bay Medical Foundation, Sutter Pacific Medical Foundation, Sutter Gould Medical Foundation, and Sutter Medical Foundation.
"Misrepresenting patients' risk results in higher payments and wasted Medicare funds," said Steven J. Ryan, Special Agent in Charge with the Office of Inspector General for the Department of Health and Human Services.
"With some one-third of people in Medicare now enrolled in managed care Advantage plans, large health systems such as Sutter can expect a thorough investigation of claimed enrollees' health status," Ryan said.
Earlier this month, DOJ filed a complaint against Sutter and a separate affiliated entity, Palo Alto Medical Foundation, alleging that they violated the False Claims Act by knowingly submitting unsupported diagnosis scores.
Sutter Responds
Lisa Page, vice president of communications and public relations at Sutter Health, said the "settlement reflects our decision to resolve a dispute with the federal government over whether Sutter Health and certain affiliated medical foundations received overpayments after submitting claims for reimbursement through the Medicare Advantage program."
"As the Department of Justice noted in its press release, the claims being resolved are allegations only, and neither Sutter nor its affiliated medical foundations admit any liability. With respect to the reimbursement claims at issue in the pending litigation, we look forward to the opportunity to explain why neither Sutter Health nor Palo Alto Medical Foundation violated the False Claims Act," Page said.
Evidence showed that dentist Edward R. Hills and three colleagues from 2008 through 2016 took part in elaborate bribery conspiracies, witness tampering and other crimes.
The former COO of MetroHealth Hospital System was sentenced this week to more than 15 years in federal prison for his role in a conspiracy that used bribes and kickbacks to defraud the Cleveland health system's dental program of hundreds of thousands of dollars.
A jury last year found Edward R. Hills, 58, of Aurora, Ohio guilty of criminal charges in a trial last year, along with coconspirators and fellow dentists Sari Alqsous, 34, of Cleveland, Yazan B. Al-Madani, 34, of Westlake, and Tariq Sayegh, 38, of Cleveland.
The three codefendants will be sentenced later this month. Restitution will be determined later, federal prosecutors said.
"Dr. Hills violated the trust of taxpayers and the leadership of a hospital dedicated to serving the least among us," U.S. Attorney for Northern Ohio Justin Herdman said in a media release.
"Dr. Hills earned this prison sentence by putting his greed above all else, soliciting and taking cash, rent payments, plane tickets, an expensive briefcase and other items as bribes," he said.
Hills was COO and Director of MetroHealth Dental. He also served as interim president and CEO from December 2012 through July 2013.
Alqsous, Al-Madani and Sayegh worked for MetroHealth.
According to testimony and documents presented at trial, the three racketeers conspired from 2008 through 2016 in elaborate bribery conspiracies, witness tampering and other crimes.
These bribes include Hills soliciting cash, checks, a $3,879 Louis Vuitton briefcase, a 55-inch television, airline flights and use of a downtown apartment from Alqsous, Al-Madani and others.
In return, Hills took official actions on their behalf, including allowing them to work at their private dental businesses during regular business hours while receiving a full-time salary from MetroHealth.
Alqsous, Al-Madani and others gave cash, checks and other things of value to Hills beginning in 2009. Evidence included text messages and meetings, often at expensive restaurants, which resulted in cash being deposited into Hills' bank accounts, DOJ said.
Hills became interim President and CEO of the MetroHealth Hospital System in December 2012. Around that time, he told Alqsous, Al-Madani and others that he wanted a specific Louis Vuitton briefcase because his predecessor had a similar briefcase.
Alqsous texted a photo of the briefcase to Hills and wrote: "The guys are also very excited about their raise haha."
Hills responded with: "Thanks I'm so excited to have my bag to start my new job as #1." Later that day, Alqsous, Al-Madani and others purchased the briefcase for $3,879 from Saks Fifth Avenue and gave it to Hills, court documents showed.
As director of MetroHealth Dental, Hills was responsible for determining monthly bonuses for dentists who produced receipts in excess of their monthly salary and benefits.
Between 2010 and 2014, Hills regularly upwardly adjusted the bonuses of Alqsous, Al-Madani and others, by a total of approximately $92,829.
Hills also allowed Alqsous, Al-Madani and others to retain full-time salaries and benefits at MetroHealth without working full-time, allowing them to operate private dental clinics.
Hills, acting for Alqsous and Al-Madani, provided MetroHealth dental residents to practice at those private clinics during regular business hours. Neither Alqsous nor Al-Madani paid wages or salaries to the resident dentists, DOJ said.
Additionally, Alqsous, Al-Madani and Sayegh solicited and accepted bribes totaling tens of thousands of dollars from prospective candidates to the MetroHealth Dental residency program.
In a typical year, the MetroHealth Dental residency accepted four to six candidates for the residency program from a pool of 40 to 60 applicants. Alqsous, Sayegh and Al-Madani each had the authority to influence the selection of dental residents, and Hills had final decisional authority over who was selected for the residency program.
Alqsous and Sayegh often identified and selected candidates who were from Jordan or trained at a Jordanian dental school, telling them they would have to pay a "donation" to MetroHealth to be considered. Alqsous and Sayegh directed the candidates to pay the "donation" directly to them, and in some cases, told the candidates a portion of the money would go to Hills.
Alqsous, Sayegh and Al-Madani solicited at least $75,000 in bribes from resident dentist candidate between 2008 and 2014.
In another conspiracy, Al-Madani and Alqsous paid bribes to Hills in exchange for him taking actions to refer Medicaid recipients to private dental clinics owned by Al-Madani and Alqsous instead of MetroHealth.
A spokeswoman for MetroHealth said the health system would not be commenting on the proceedings.
The deal would combine, coordinate and integrate clinical services taught in the medical schools and administered in the hospitals, with an emphasis on identifying and managing chronic health issues in the communities they serve
North Carolina's Atrium Health, Wake Forest Baptist Health, and Wake Forest University have announced plans to form a "combined" academic health system designed for population health, which will feature a new medical school in Charlotte.
The three organizations this week signed a memorandum of understanding that puts them in exclusive negotiations with the aim of achieving a final agreement later this year.
"Phenomenal things can happen when like-minded partners, committed to the same transformative vision, come together in new ways to better serve our patients and communities," Eugene A. Woods, president and CEO of Atrium Health, said Wednesday in a media release.
"For example, Wake Forest School of Medicine and Wake Forest Baptist Health are national leaders in studying how to help people age better, and with a much higher quality of life," he said. "Last year at Atrium Health, we cared for more than 350,000 patients over the age of 65, and by 2035, one in five U.S. residents will be over that age."
"Just imagine the powerful possibilities to advance modern medicine by linking breakthrough science directly with our patients in a way that significantly enhances their cognitive and physical functioning—and allows them to live independently for longer," Woods said.
Wednesday's announcement comes a little more than a year after talks of a potential merger between Atrium Health and UNC Health Care fell apart.
Under the memorandum signed this week, the deal would combine, coordinate, and integrate clinical services taught in the medical schools and administered in the hospitals for specialties such as oncology, pediatrics, cardiac, and gerontology services, with an emphasis on identifying and managing chronic health issues such as obesity, diabetes, and age-related illnesses in the communities they serve.
The combined academic health system would also build a new medical school in Charlotte for Wake Forest School of Medicine and make capital improvements to existing medical school in Winston-Salem.
"We are eager to bring this shared vision for our future to life with Atrium Health," said Julie Ann Freischlag, MD, CEO of Wake Forest Baptist Health and dean of Wake Forest School of Medicine.
"It's incredible to think about the impact we can make, together, advancing patient-centered research, a next-generation curriculum and active population health analytics across our combined footprint," Freischlag said. "We can create amazing outcomes that embrace true change – most importantly enhancing, extending and saving the lives of countless people." nationally leading role in research," Hatch said.
Atrium Health, an integrated nonprofit health system headquartered in Charlotte, includes 42 hospitals and more than 900 care locations with 14 million patient visits annually.
Wake Forest Baptist Health's academic medical center and regional healthcare system sees 2.2 million patient visits each year across seven hospitals and more than 400 care locations.
Collectively, the executives, business owners and medical professionals involved in the conspiracy are accused of causing more than $1 billion in losses for Medicare.
Federal prosecutors are calling it one of the largest healthcare fraud schemes they've ever investigated.
Criminal indictments were made public this week against 24 people, including CEOs, COOs, physicians, and other executives at five telemedicine companies, and the owners of 130 durable medical equipment companies across 17 federal judicial districts for their roles in various schemes to bilk Medicare out of $1.2 billion.
Prosecutors said the DME companies allegedly paid kickbacks and bribes in exchange for the referral of Medicare beneficiaries by physicians in cahoots with fraudulent telemedicine companies for unnecessary back, shoulder, wrist and knee braces.
Some of the defendants allegedly controlled an international telemarketing network that lured over hundreds of thousands of elderly and/or disabled patients into a criminal scheme that crossed borders, involving call centers in the Philippines and throughout Latin America, prosecutors said.
The defendants allegedly paid doctors to prescribe DME either without any patient interaction or with only a brief telephonic conversation with patients they had never met or seen.
"The breadth of this nationwide conspiracy should be frightening to all who rely on some form of healthcare," said Don Fort, Chief of Criminal Investigations at the Internal Revenue Service, one of six federal agencies involved in the probe.
"The conspiracy described in this indictment was not perpetrated by one individual. Rather, it details broad corruption, massive amounts of greed, and systemic flaws in our healthcare system that were exploited by the defendants," Fort said.
The 130 DME companies submitted more than $1.7 billion in claims to Medicare and were paid more than $900 million, and accounted in total for more than $1 billion in losses for the federal government.
The swindled money was allegedly laundered through international shell corporations and used to purchase exotic automobiles, yachts and luxury real estate in the United States and abroad, prosecutors said.
Court documents allege that some of the defendants lured patients for the scheme by using an international call center that advertised to Medicare beneficiaries and "up-sold" the beneficiaries to get them to accept numerous "free or low-cost" DME braces, regardless of medical necessity.
The international call center allegedly paid illegal kickbacks and bribes to telemedicine companies to obtain DME orders for these Medicare beneficiaries. The telemedicine companies then allegedly paid physicians to write medically unnecessary DME orders. Finally, the international call center sold the DME orders that it obtained from the telemedicine companies to DME companies, which fraudulently billed Medicare.
Defendants Identified
In New Jersey, Neal Williamsky 59, of Marlboro, and Nadia Levit, 39, of Englishtown, New Jersey, owners of 25 DME companies, were indicted for their alleged participation in a $150 million scheme.
Albert Davydov, 26, of Rego Park, New York, was charged for his alleged participation in a $35 million DME scheme.
Creaghan Harry, 51, of Highland Beach, Florida; Lester Stockett, 51, of Deefield Beach, Florida; and Elliot Loewenstern, 56, of Boca Raton, Florida; the owner, CEO and VP of marketing, respectively, of call centers and telemedicine companies were charged for their alleged participation in a $454 million kickback and money laundering scheme.
Joseph DeCoroso, MD, 62, of Toms River, New Jersey, was charged in a $13 million conspiracy to commit healthcare fraud and separate charges of healthcare fraud for writing medically unnecessary orders for DME, often without speaking to patients, while working for two telemedicine companies.
In Florida, Willie McNeal, 42, of Spring Hill, the owner and CEO of two telemedicine companies, was charged for his alleged participation in a $250 million scheme to swap kickbacks and bribes for DME referrals.
In Dallas, Texas, Leah Hagen, 48, and Michael Hagen, 51, of Dalworthington Gardens, owners and operators of two DME companies, were charged for their alleged participation in a $17 million kickback scheme that generated unnecessary DME orders.
In El Paso, Texas, Christopher O’Hara, 54, of Kingsbury, the owner of a telemedicine company, was charged in an $40 million scheme to swap kickbacks and bribes for referrals to DME providers.
In Philadelphia, Randy Swackhammer, MD, 60, of Goldsboro, North Carolina, was charged for an alleged $5 million conspiracy to commit healthcare fraud. Swackhammer allegedly wrote medically unnecessary orders for DME while working for a telemedicine company, often with only brief conversations with patients.
In California, Darin Flashberg, 41, and Najib Jabbour, 47, both of Glendora, and owners of seven DME companies, were charged with alleged participation in a $34 million scheme that paid kickbacks and bribes in exchange for unnecessary DME orders.
In South Carolina, Andrew Chmiel, 43, of Mt. Pleasant, owner of over a dozen companies involved in the scheme, was charged in a $200 million scheme to pay kickbacks and bribes in exchange for unnecessary DME orders.
The DOJ says a prompt resolution of the Texas-led challenge 'will help reduce uncertainty in the healthcare sector and other areas affected by the ACA.'
The Trump administration has asked a federal appeals court to expedite oral arguments in a lawsuit that could determine the future of the Affordable Care Act.
In a filing Monday with the Fifth Circuit Court of Appeals, the Department of Justice requested that the case be scheduled for oral argument the week of July 8.
"Prompt resolution of this case will help reduce uncertainty in the healthcare sector, and other areas affected by the Affordable Care Act," the DOJ said.
U.S. District Judge Reed O'Connor last December declared the entire ACA invalid, as a Texas-led coalition of plaintiff states had requested. The ruling was appealed to the Fifth Circuit by a California-led coalition of states intervening in defense of the ACA.
The DOJ's filing said the other parties and intervenors involved in the case don't oppose the motion to expedite.
O'Connor's ruling invalidating the ACA went much further than what DOJ had urged. Last month, however, DOJ reversed course and notified the appeals court that it agrees with the plaintiffs' argument and O'Connor's ruling, and would entirely abandon its partial defense of the ACA.
New partnership plans to increase availability of patient-centered primary care with easy access to multiple medical and wellness services.
Blue Cross and Blue Shield of Texas and Sanitas USA will partner to open 10 advanced primary care clinics in Dallas and Houston, the two companies announced Monday.
The clinics, scheduled to open on January 1, 2020, will provide primary care, urgent care, lab and diagnostic imaging services, care coordination, and wellness and disease management programs--all under one roof, the companies said.
"Our partnership with Sanitas is another example of collaborating with healthcare providers to deliver the best possible care and support to our members," said Dan McCoy, MD, president of BCBSTX.
"We believe that this partnership will advance primary care services and is an effective approach to providing quality healthcare outcomes, improving member engagement and experience, and lowering costs for our members, including populations that may have difficulty accessing care," McCoy said.
Some clinics will be open 365 days a year, and every location will have extended weekday and weekend hours. The clinics will service Blue Cross and Blue Shield card holders and accept self-pay patients and seniors with traditional Medicare coverage, the companies said.
"Our approach to care is centered on our patients and their families, giving them more time with the doctor and the convenience of a one-stop medical center for their everyday healthcare needs," said Joseba Grajales, president of Keralty Group, the parent company of Sanitas USA.
"Our expansion to Texas will continue to build on our success in Florida, New Jersey and Connecticut, serving more than 200,000 patients in diverse communities," he said.
The 10 medical centers will be located throughout Harris and Dallas counties: Bellaire, Katy, Northwest Houston, Southeast Houston, Spring and West Houston in Harris County; and Irving, Las Colinas, Mesquite and Richardson in Dallas County. Construction begins this spring.
Sanitas operates 29 clinics in Florida, Connecticut and New Jersey, often in collaboration with health insurance companies.
The pharmacy benefits managers-backed study says it would be 'premature' for policymakers to adopt the rule without better understanding its impact.
The federal government's proposed rule on prescription drug rebates is getting panned by the pharmacy benefits management lobby.
"The Administration has expressed a strong concern about the cost of prescription drugs in the U.S. healthcare system. Oddly, the proposed rule will increase revenues and reduce costs for drugmakers," said Alex Brill, CEO at Matrix Global Advisors, the author of a studycommissioned by the Pharmaceutical Care Management Association.
According to Brill, the proposed rule, released in February by the HHS Office of Inspector General, would "raise net drug prices in Medicare Part D under the guise of reducing list prices, shift drug costs from the commercial market to the Medicare Part D market, and raise costs on all Medicare beneficiaries through higher premiums in order to lower out-of-pocket costs for those with expensive prescription drugs."
"More concerning is the uncertainty regarding the effects of the proposed rule in numerous critical regards," Brill wrote. "It would be premature for policymakers to proceed without better understanding the proposed rule's impact on federal healthcare programs and beneficiaries, its far-reaching effects in the drug supply chain, and its indirect effects on the commercial market."
PCMA issued a media release calling the HHS proposal "poorly conceived." J.C. Scott, president and CEO of PCMA, said the analysis his association paid for "confirms that the proposed policy changes risk significantly raising costs for Medicare beneficiaries and taxpayers, disrupting Part D."
"PBMs share the Administration's goals. To better achieve them, we believe that if the proposed rule moves forward, it should be modified so that PBMs continue to be able to negotiate for lower drug prices for consumers and be empowered to help administer any new system."
HHS unveiled the proposed rule in February, and said that eliminating rebates would incentivize drugmakers to lower list prices, and incentivize PBMs to negotiate greater discounts from drugmakers. Ultimately, HHS said, "the goal of this policy is to lower out-of-pocket costs for consumers and reduce government spending in Federal health care programs."
Brill said his report jibes with the Centers for Medicare & Medicaid Services Office of the Actuary concerns that restricting rebates will lead to lower price concessions by drug manufacturers, which will increase spending on prescription drugs and create a windfall for drugmakers.
Addressing the skyrocketing costs of prescription drug prices has been a top item on the agenda of Congressional Democrats and Republicans, and the Trump Administration. The Senate Finance Committee on Tuesday hosts executives from five leading PBMs as part of its ongoing efforts to address the issue.
The companies alleged used the foundations as a conduit for copays that induced patients to use their drugs, with the higher prices eventually billed to government-sponsored health plans.
Three pharmaceutical companies will pay a combined $122.6 million to resolve separate allegations that they used third-party foundations as conduits for copays for their own products, the Department of Justice said.
The companies—Jazz Pharmaceuticals plc, Lundbeck LLC, and Alexion Pharmaceuticals Inc.—will pay $57 million, $52.6 million, and $13 million, respectively, to resolve alleged violations of the federal False Claims Act in the kickback schemes that resulted in higher costs for Medicare and the Civilian Health and Medical Program, DOJ said.
The alleged schemes occurred between 2010 and 2016, DOJ said.
The Anti-Kickback Statute bans drug makers from paying any remuneration, including copays, to induce government-sponsored health plan enrollees to purchase the companies' drugs.
"Pharmaceutical companies undercut a key safeguard against rising drug costs when they create assistance funds to serve as conduits for the companies to subsidize the copays of their own drugs," Assistant Attorney General Jody Hunt of DOJ's Civil Division, said in a media release.
"These enforcement actions make clear that the government will hold accountable drug companies that directly or indirectly pay illegal kickbacks," Hunt said.
Jazz and Lundbeck each entered five-year corporate integrity agreements with the Department of Health and Human Services' Office of the Inspector General.
Alexion was exempted from a CIA "because it made sweeping and fundamental organizational changes following the bad conduct," DOJ said.
The changes included firing the C-suite, and ousting half of the members of its board of directors. In addition, 40% of Alexion's employees are new and the company relocated its corporate headquarters to Boston, DOJ said.
Jazz
The allegations against Jazz center on the sale of its narcolepsy drug Xyrem. Jazz allegedly used the Caring Voice Coalition to established a "Narcolepsy Fund" for which Jazz was the sole donor.
"Although Xyrem accounted for a small share of the overall narcolepsy market, the fund almost exclusively used Jazz's donations to pay copays for Xyrem and required non-Xyrem patients on competing products to obtain a denial letter from another assistance plan before helping them," DOJ said.
Prosecutors also allege that Jazz made Medicare patients ineligible for the drug maker's free drug program and instead referred Xyrem Medicare patients to the foundation, enabling Jazz to generate revenue from Medicare and induce purchases of the drug, rather than continuing to provide these patients with free drugs.
Meanwhile, Jazz raised the price of Xyrem by over 150% over the course of the scheme.
Jazz also sold Prialt, an injectable severe chronic pain medication. The government alleged that Jazz asked the same foundation to create a fund ostensibly to assist patients with the co-pays of any severe chronic pain drugs, but which, in practice, almost exclusively paid Prialt Medicare copays.
Shortly after creating the fund, the foundation allegedly told Jazz that when severe chronic pain patients seeking assistance with other drugs contacted the foundation, it would refer them elsewhere. Prosecutors said Jazz knew that the fund did not appear on the foundation's website, which minimized the number of non-Prialt patients seeking assistance.
Jazz issued a statement noting that the settlement "is not an admission by Jazz of liability or the facts alleged by the DOJ but a settlement of the government’s claims" against the company. The company said it has rigorous compliance guidelines in place for its relationships with independent foundations that provide patient support.
Lundbeck
Lundbeck sells Xenazine, the only drug that was approved to treat chorea associated with Huntington's disease until a generic version became available until 2015.
Prosecutors said Lundbeck was the sole donor to a fund at a foundation that ostensibly provided financial support only for patients with Huntington's Disease. However, Lundbeck allegedly referred Xenazine patients with many other conditions to this foundation, which then paid the Xenazine copays for these unapproved uses.
After the foundation determined in 2014 that its Huntington's Disease fund would no longer pay the copays of patients taking Xenazine for non-Huntington's diseases, Lundbeck repurposed prior donations to the Huntington’s Disease fund to a "general fund" at the foundation to pay patients’ Xenazine copays, DOJ said.
Lundbeck also allegedly made subsequent "unrestricted" payments to the foundation with the understanding that the foundation would use these payments to pay Xenazine copays for these same patients.
When Lundbeck asked the foundation if there was a risk of getting caught, the foundation alleged replied that government regulators "don't know what we use the general fund for," DOJ said.
Lundbeck wouldn’t let Medicare or ChampVA patients participate in its free drug program for Xenazine, which was open to other financially needy patients, even if those Medicare or ChampVA patients could not afford their copays for Xenazine.
Instead, in order to generate revenue from Medicare and ChampVA and to induce purchases of Xenazine, Lundbeck allegedly referred financially needy non-Huntington’s Disease Xenazine patients to the foundation, which resulted in claims to Medicare and ChampVA to cover the cost of the drug, DOJ said.
Lundbeck issued a statement saying that the settlement "allows us to put this matter behind us and continue our focus on providing innovative medications for people living with brain disorders. The agreement does not include any admission that we violated any law."
Alexion
The allegations against Alexion involve the sale of Soliris, a $500,000-a-year drug that is used to treat patients with paroxysmal nocturnal hemoglobinuria and atypical hemolytic uremic syndrome.
Prosecutors allege that Alexion made donations to a "Complement-Mediated Disease" fund at a foundation to pay the Medicare copay obligations of patients taking Soliris and to induce those patients' purchases of Soliris.
Alexion allegedly knew that sky-high price would make the drug unaffordable for many patients, so the company asked a foundation in 2010 to create a financial assistance fund for Soliris patients. The fund paid Medicare copays and other medical expenses.
Alexion—the sole donor to the fund—knew the foundation's financial help for patients was contingent on the patients taking Soliris.
Alexion wouldn’t let Medicare patients to participate in its free drug program, which was open to other financially needy patients, even if those Medicare patients could not afford their copays for Soliris.
Instead, in order to generate revenue from Medicare and induce purchases of Soliris, Alexion allegedly referred Medicare patients prescribed Soliris to the foundation, through the foundation's "referral portal" software.
Allegedly, the "referral portal" reported information back to Alexion confirming those Soliris patients who were approved for copay from the foundation, and detailed the foundation’s payments to them, which resulted in claims to Medicare to cover the cost of Soliris.
Alexion said in a media release that it was "pleased to have reached a constructive resolution with the government that recognizes the significant positive changes achieved over the last two years under the company’s new leadership."
